We have been living with digital platforms for about a decade now and their impact on changing how we work is beginning to make itself felt. Even so, it merits much greater attention and investigation, but until now the spotlight has been trained firmly on robots and automation.
Digital platforms are disrupting traditional business models. Physical presence is no longer a prerequisite for doing business. Platform firms do not produce end-products or services, they simply connect people, companies and places.
Think of a platform as a matchmaker, but turbo-charged by digital technology – a familiar business model bestowed with super-powers by new digital tools. And these digital platforms are connecting at a global scale.
Digital technologies allow for fast scaling. Jamalon, an online book retailer since 2010 in Amman, Jordan, has been able, with fewer than 100 staff, to establish partnerships with over 3,000 Arabic-language and 27,000 English-language publishers, delivering 10 million titles to the Middle East. Platform-based businesses are on the rise across the globe, providing new opportunities to trade goods and services.
Digital platforms provide access to goods and services across the world within seconds; they lower transaction costs as well as expenditure for the allocation of resources; they are a driving force for economic innovation and dynamism; and they enable a variety of new services.
Best of all, digital platforms create jobs. Since 2009 many clusters of rural e-tailers have opened shops on Taobao.com Marketplace, creating “Taobao Villages”. These Taobao Village merchants produce consumer goods, agricultural products and handicrafts based on their particular skills. Taobao Villages have created more than 1.3 million jobs, luring young people who migrated to cities back to their places of birth to start up enterprises.
But that’s just the start.
Increasingly, platforms for creative, well-educated online workers, are conquering labor markets. Workers are hired to perform tasks that are complex, demanding and technical, ranging from marketing, to writing and engineering. Upwork, a typical “crowdsourcing platform”, has twelve million registered freelancers, five million registered clients and three million jobs posted annually.
Digital work will play an increasingly important role in the current and future jobs agenda. Take the case of the Middle East and North Africa (MENA) region, where high-skill university graduates currently make up almost 30 percent of the unemployed pool of labor. The region needs to create more than ten million jobs a year just to keep up with its demographic bulge. Providing the opportunity to work with crowdsourcing digital platforms may offer an effective solution.
These platforms are not yet that well known. Their workers mostly come from the US and India. To harness the job opportunities presented by digital platforms, it is important to rethink the enabling environment more broadly, in a way that includes social protection and IT infrastructure.
Platform-based work, besides the lack of job security, does not provide social protection under current systems. In fact, social safety nets and labor institutions are still conceived around long-term employer-employee relationships, which are increasingly challenged by the changing nature of work (2019 World Development Report). More fluid and dynamic labor markets demand rethinking social protection while ensuring that firms and workers can respond to changes in technology and product markets.
Providing social assistance and social insurance needs to be decoupled from how and where people work. These safeguards must be coordinated with labor market institutions to jointly provide protection and promote employment. To implement this change we need to reconsider the fundamental elements of the enabling business environment, which should have social protection at heart.
Broadband access is a prerequisite for business in the digital era - many firms depend in part or even exclusively on the internet. Mobile phone access alone is no longer sufficient; broadband technologies push down transaction costs even further in remote markets that lack transport infrastructure.
The MENA region hosts some of the most under-served internet users, with fewer than ten broadband subscriptions per 100 inhabitants (in stark contrast to the 120 mobile phone subscriptions for every 100 inhabitants). Bandwidth per subscriber is also limited. The result is that, while many citizens are active on social media, digital finance has barely any presence.
MENA lags behind on digital payments despite its middle-income status and that is a huge impediment to the advent of platforms and e-commerce. When it comes to mobile money, for example, East African countries outperform their MENA counterparts.
Jumping on this platform will need greater investments to build the digital highways for tomorrow’s job-seekers and workers.